Tuesday, November 08, 2011

Let’s make some assumptions…assumptions that you and certainly I don’t take for granted.

First, let’s assume that this is an active blog that some people still have on their readers. Let’s then assume for a minute that this is an appropriate place to rant about straight-up Washington politics.

Let’s assume that the national government is at least legitimate in principle, or could be legitimate if it stuck to the powers and limitations in the written Constitution.

To get even more theoretical, let’s assume that there was a group of individuals who had the intelligence, moral integrity and will to truly reform things for the common good.

Let’s assume those people got past the gatekeepers and rose to power.

Finally (since we’re already in the province of the absurd) let’s assume that I, the Kansas City Curmudgeon, was the leader of this little cabal of right thinking men.

The Curmudgeon Cabal doesn’t have silver bullet to immediately kill the serious moral and cultural monsters that haunt our society. Admittedly, those moral and cultural problems are far more important than taxes, spending and the economy. There just isn’t a quick fix--except perhaps outlawing television, but I don’t think that’s going to happen. What’s been destroyed since the 1920s (or since the French Revolution, or the days of William of Occam) will need to be rebuilt over generations, not months or years.

But there IS a quick fix to the temporal, material problem, and the fix might actually be a first step (or a second step, after fervent prayer and mortification) in addressing the moral/cultural problems. The quick fix is what I’ll call the Curmudgeon Reform Act of 2011. There are 5 elements—so far:

Replace the Social Security scheme with a real savings and disability plan.

Institute a low, simplified tax on ordinary income and long-term capital gains.

Institute a new Culture, Welfare and Education tax (“CWE”) that will never be collected.

Here are the details:

1. Replace the Social Security scheme with a real savings and disability plan. Eliminate payroll taxes (Social Security and Medicare). Instead, require, for the first ___ years after the elimination, that every wage earner put 10% of his income in a privately managed, competitive but somewhat regulated welfare plan that provides disability and retirement income. Create a self-funded pension insurance program among the welfare plan providers to ensure at least a subsistence pension. Allow voluntary participation in Social Security and Medicare for people over 45 or so. Continue the employer-side taxes for a short while to help fund the folks currently on, or about to go on, the old system. Eventually, as the people’s savings ethic is restored and our charitable infrastructure is rebuilt, we can eliminate the mandatory savings plan. Or maybe we can’t.

2. Institute a low, simplified tax on ordinary income and long-term capital gains. Reduce taxes on ordinary income and long-term capital gains to a flat 5% or so on all income above the poverty level for each family. No deductions. Simplify the business tax rules so it’s easy to get to a net taxable income, and eliminate things like tax credits, accelerated depreciation, and the like. Tax every individual person and every limited liability entity (corporations, LLCs, LPs and LLPs) that function as a separate legal person. (Yes, this is double taxation, but at 5% / 10%, it’s a reasonable price to pay for the privilege of doing business in a non-recourse entity).

3. Retain or increase high taxes on short term speculation. Keep taxes on short term capital gains at a high level. Let's say 25%. Disallow the write-offs of short term capital losses. Yes, this would be said to “punish” short term investors. Why? Because they’re not really investors; they’re traders. We’ve gone from a society of investors to a society of speculators. Some speculation is necessary to ensure liquidity in our markets and to reward, in some degree, risk taking (that is, taking risks with ones’ own resources). However, high taxes on speculators will hopefully realign our capital markets.

4. Restore revenue generating tariffs on imports and adjust excise taxes to cover certain public goods. Institute modest tariffs on all imported goods. Not 40% or 50%. More like 5% or 10%. The tarriff should be a revenue mechanism, not a protectionist one. We won’t need protectionism if the Curmudgeon reforms are in place. Once again, it will pay to actually make things in the USA. Also, adjust excise taxes on things like motor fuel, as well as fees, to fully recover the cost of providing public goods like highways, so the taxes and the cost of those public goods are balanced and self-supporting.

5. Institute a new Culture, Welfare and Education tax (“CWE”) that will never be collected. Here’s the capstone of the plan: In lieu of all federal welfare, cultural and education programs, the Curmudgeon Cabal will institute a 10% tax on all income above the poverty level for the support of culture, welfare and education (sounds suspiciously like a tithe, doesn’t it?). The beauty of the CWE tax is that if it works, it will never be collected. We will allow a 100% tax credit (not a deduction…a dollar-for-dollar credit) for donations made to qualified charitable organizations. You know….organizations which are now referred to as 501(c)(3)’s. Although we hate bureaucracy and regulation, we acknowledge that we’ll need a few rules about this. Organizations will be subject to some minor regulation, somewhat as they are now, in order to assure legitimacy. They’ll also be classified: the big categories will be (a) physical welfare/poverty, (b) religion, (c) the arts, (d) the environment, and (e) education. Moneys flowing to these organizations will rebuild the societal infrastructure that was in place before the New Deal and the Great Society. The beauty is that the taxpayer--not the government--will decide how to allocate those donations between categories and which organizations within the categories to support. The only substantial restriction on the taxpayer is that no more than half of that 10% tax can go to any one category. Overtime, churches can restore hospitals, private education, and the like. Communities can support the arts (hopefully a restoration of true art, and nothing involving the use of feces). The cost of higher education can come down for those who should pursue it. Private conservation groups can buy and preserve habitats. Yada Yada.

In Conclusion

Now, I didn’t say The Curmudgeon Reform Plan wasn’t crazy. It is.

I didn’t say it would cure instantly the cultural malaise. It won’t.

I didn’t say it would bring about the Catholic confessional state. It can’t.

The plan (and the radical cuts in the federal and state government that go along with it) it be vigorously opposed by the greater DC real estate industry--not just the machine of government itself. The housing and office markets in DC, Montgomery County, Maryland and Fairfax County, Virginia will be devastated as out-of-work bureaucrats leave to find private sector jobs in the Heartland. But heck, maybe it will help the real estate market in Detroit?

All and all, the Curmudgeon Reform Plan can’t be worse that what we’re doing now. And, since this is a sorta, kinda Catholic blog (or at least a blog by a Catholic), I point out that it will be good for Holy Mother Church. I eagerly await the USCCB endorsement.

OK, I’ve already thought of one necessary change. Five percent on ordinary income may be a pretty high rate, considering that President Curmudgeon will be eliminating the federal welfare system, reducing the military to its proper role national defense (instead of imperial domination), ending foreign aid, reinstituting modest revenue-producing tarriffs, and otherwise moving to a consumption-based tax system for roads, etc. Let’s make it 3%.